A Canadian hedge fund manager has been accused of lying about a Chinese silver company to drive down its stock price.

The British Columbia Securities Commission accused Jon Richard Carnes of making false claims about Silvercorp Metals, which does business in China but is based in Vancouver, on his blog, Alfredlittle.com two years ago. The report hit the mark: Silvercorp shares swooned by 20%—and Carnes covered his short bet against the company the following day, earning US$2.8 million.

The only problem, according to the BCSC, is that Carnes made the whole thing up.

"Carnes attempted to find a mining expert to support his theory that Silvercorp's Chinese filings contradicted its North American regulatory filings for the company's SGX mine, as the Chinese filings had lower production, quality and resource estimates," the regulator alleges. "When two mining experts failed to support his theory and with his put options about to expire, staff maintains that Carnes wrote a false negative report about Silvercorp and published it anonymously on Sept. 13, 2011."

Carnes said he would fight the allegations, and noted that his claims against Silvercorp "proved to be true," leading to a pair of class-action shareholder lawsuits. Silvercorp counters that Carnes' accusations "have been established as entirely false."

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